SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-16886
Banyan Strategic Land Fund II
(Exact name of Registrant as specified in its charter)
Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 553-9800
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X . NO .
Shares of common stock outstanding as of November 13, 1996: 9,936,421.
Transitional Small Business Disclosure Format: YES . NO X .
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
1996 1995
ASSETS
Cash and Cash Equivalents $ 72,150 $ 549,309
Interest Receivable on
Investments --- 3,754
Interest Receivable on
Loans 101,347 59,470
Investment Securities --- 626,946
Loans Receivable 945,000 785,000
Foreclosed Real Estate
Held for Sale 11,211,991 11,700,657
Investment in Real Estate
Venture 7,164,410 7,122,492
Other Assets 572,385 822,592
------------ ------------
Total Assets $ 20,067,283 $ 21,670,220
============ ============
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 484,673 $ 630,500
Accrued Real Estate Taxes 43,577 ---
------------ ------------
Total Liabilities $ 528,250 $ 630,500
------------ ------------
Stockholders' Equity
Shares of Common Stock,
$0.01 Par Value,
50,000,000 Authorized,
19,266,268 Shares
Issued 170,927,133 170,927,133
Accumulated Deficit (135,533,893) (134,033,206)
Treasury Stock at Cost,
9,329,847 Shares (15,854,207) (15,854,207)
------------ ------------
Total Stockholders' Equity 19,539,033 21,039,720
------------ ------------
Total Liabilities and
Stockholders' Equity $ 20,067,283 $ 21,670,220
============ ============
Book Value Per Share of
Common Stock (9,936,421
Shares Outstanding) $ 1.97 $ 2.12
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
INCOME 1996 1995
Interest on Note and
Loans Receivable $ 51,050 $ 19,871
Income on Investments 2,969 350,946
----------- ------------
Total Income 54,019 370,817
----------- ------------
EXPENSES
Expenses From Property
Operating Activities:
Net (Gain) Loss From
Disposition of
Foreclosed Real Estate
Held for Sale, Net (31,091) 39,846
Net Loss From Operations
of Foreclosed Real
Estate Held for Sale 664,491 1,236,070
Net Loss (Income)
From Operations of
Real Estate Venture 68,607 (174,972)
----------- ------------
Total Expenses From
Property Operating
Activities 702,007 1,100,944
----------- ------------
Other Expenses:
Stockholder Expenses 90,666 183,752
Directors' Fees, Expenses
and Insurance 149,552 323,416
Other Professional Fees 113,803 429,003
General and Administrative 500,778 776,028
Recovery of Losses on
Loans, Notes and
Interest Receivable (2,100) (23,277)
----------- ------------
Total Other Expenses 852,699 1,688,922
----------- ------------
Total Expenses 1,554,706 2,789,866
----------- ------------
Net Loss $(1,500,687) $ (2,419,049)
=========== ============
Net Loss Per Share of
Common Stock (Based on
the Weighted Average
Number of Shares Outstanding
of 9,936,421 and 15,297,847,
respectively) $ (0.15) $ (0.16)
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
INCOME 1996 1995
Interest on Note and Loans
Receivable $ 20,226 $ 8,989
Income on Investments 897 107,567
----------- ------------
Total Income 21,123 116,556
----------- ------------
EXPENSES
Expenses From Property
Operating Activities:
Net Loss From Operations
of Foreclosed Real Estate
Held for Sale 124,004 322,855
Net Loss (Income) From
Operations of
Real Estate Venture (17,424) (234,905)
----------- ------------
Total Expenses From Property
Operating Activities 106,580 87,950
----------- ------------
Other Expenses:
Stockholder Expenses 10,617 88,451
Directors' Fees, Expenses
and Insurance 49,931 87,856
Other Professional Fees 22,839 62,741
General and Administrative 152,579 174,534
Recovery of Losses on
Loans, Notes and
Interest Receivable (2,100) ---
----------- ------------
Total Other Expenses 233,866 413,582
----------- ------------
Total Expenses 340,446 501,532
----------- ------------
Net Loss $ (319,323) $ (384,976)
=========== ============
Net Loss Per Share of Common
Stock (Based on the
Weighted Average Number of
Shares Outstanding of
9,936,421) $ (0.03) $ (0.04)
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Common Stock Accumulated Treasury
Shares Amount Deficit Stock Total
<S> <C> <C> <C> <C> <C>
Stockholders'
Equity,
December 31,
1995 19,266,268 $170,927,133 $(134,033,206) $(15,854,207) $21,039,720
Net Loss --- --- (1,500,687) --- (1,500,687)
----------- ------------ ------------ ------------ ------------
Stockholders'
Equity,
September 30,
1996 19,266,268 $170,927,133 $(135,533,893) $(15,854,207) $19,539,033
=========== ============ ============ ============ ===========
<FN> The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $ (1,500,687) $(2,419,049)
Adjustments to Reconcile
Net Loss to Net Cash Used
In Operating Activities:
Net (Gain) Loss From
Disposition of Real
Estate Held For
Sale, Net (31,091) 39,846
Recovery of Losses on
Loans, Notes and
Interest Receivable (2,100) (23,277)
Net Loss (Income) From
Operations of Real Estate
Venture 68,607 (174,972)
Net Change In:
Interest Receivable on
Investments 3,754 (6,297)
Interest Receivable on
Loans Receivable (41,877) (21,768)
Other Assets 250,207 (448,566)
Accounts Payable and
Accrued Expenses (145,827) (335,874)
Accrued Real Estate Taxes 43,577 (58,638)
----------- -----------
Net Cash Used In Operating
Activities (1,355,437) (3,448,595)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Investment
Securities --- (2,134,298)
Proceeds from Sale of
Investment Securities 310,007 499,139
Principal Payments on
Investment Securities 316,939 310,329
Proceeds from the Sale
of Foreclosed
Real Estate Held
for Sale 271,757 21,700,202
Recovery of Losses
on Loans, Notes and
Interest Receivable 2,100 23,277
Collection of Loans
Receivable 88,000 16,000
Forfeited Proceeds from
Sales Contracts --- 58,086
Payment of Liabilities
Assumed at Foreclosure
of Real Estate Held
for Sale --- (405,224)
Investments in Real Estate
Venture (110,525) (127,321)
Payment to Affiliate --- (730,229)
----------- -----------
Net Cash Provided By
Investing Activities 878,278 19,209,961
----------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Elimination of Shares
of Common Stock --- (19,606)
Acquisition of Treasury
Shares --- (15,826,570)
----------- -----------
Net Cash Used In Financing
Activities --- (15,846,176)
----------- -----------
Net Decrease in Cash and
Cash Equivalents (477,159) (84,810)
Cash and Cash Equivalents at
Beginning of Period 549,309 290,366
----------- -----------
Cash and Cash Equivalents at
End of Period $ 72,150 $ 205,556
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Strategic Land
Fund II's (the "Fund's") audited consolidated financial statements for the year
ended December 31, 1995, which are included in the Fund's 1995 Annual Report and
Form 10-KSB for the year ended December 31, 1995, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Fund and its wholly-owned subsidiaries and consolidated venture which hold
title to the Fund's properties. All intercompany balances and transactions have
been eliminated in consolidation. The Fund's 47% interest in the H Street
Assemblage is accounted for on the equity method as an investment in real estate
joint venture.
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the previously reported 1995
consolidated financial statements in order to provide comparability with the
1996 consolidated financial statements. These reclassifications have not
changed the 1995 results. In the opinion of management, all adjustments
necessary for a fair presentation have been made to the accompanying
consolidated financial statements as of September 30, 1996 and for the nine and
three months ended September 30, 1996 and 1995.
2. FORECLOSED REAL ESTATE HELD FOR SALE AND LOANS RECEIVABLE
RANCHO MALIBU
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Fund
and Banyan Mortgage Investment Fund ("BMIF") acquired title to the property
pursuant to a deed in lieu of foreclosure agreement. The Fund owns a 98.6%
general partner interest in the Venture while BMIF owns the remaining 1.4%
interest as a limited partner. The Venture's results are consolidated in the
accompanying financial statements.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu and various
citizen groups. The city initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, the most recent of which
has been decided in favor of the Venture and as to which the City of Malibu
appealed. On December 5, 1995, the Court of Appeals of the State of California
decided this appeal in favor of the Venture and on January 4, 1996 a petition
for rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
August 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, approved a revised plan to develop a fifty-one unit housing community on
the Rancho Malibu property. The Los Angeles County Regional Planning
Commission's approval was appealed to the Los Angeles County Board of
Supervisors. On May 7, 1996, the Los Angeles County Board of Supervisors
approved a compromise project to create forty-six single family lots. These
approvals are specified in Los Angeles County CUP No. 91-315(3), Oak Tree Permit
No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May 7, 1996.
On June 17, 1996, a neighboring homeowners association filed an action
entitled La Chusa Highlands Property Owners Association, Inc. v. Los
Angeles County, et al., Los Angeles County Superior Court Case No. BS039789 (the
"La Chusa Litigation"), challenging the aforesaid approvals. The Venture is
named as a real party in interest. If the plaintiff prevails in the La Chusa
litigation, the prior County approval of the tentative map and permits will be
set aside and the matter remanded back to the County Board of Supervisors for
further action consistent with the Court's decision.
The County and Venture filed answers denying the substance of the
allegations made by the plaintiffs. On September 30, 1996, the parties attended
a court-supervised settlement conference which did not result in a settlement.
On October 23, 1996, the parties, through their attorneys appeared before the
court for a status conference on the settlement meetings held in the case. The
court took no action in response to the plaintiff's request to file a motion for
sanctions against the real parties in interest predicated upon the plaintiff's
assertion that the real parties in interest were not attempting in good faith to
negotiate a settlement. The matter is currently set for trial on January 27,
1997.
In another action, the Venture challenged the General Plan and the
Environmental Impact Report associated with it adopted by the City of Malibu on
Nov. 20, 1995 in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited
Partnership v. City of Malibu, Los Angeles County Superior Court Case No.
SS006374. On July 31, 1996, the Venture and the City of Malibu executed and
delivered a settlement agreement which, among other things, resulted in a
dismissal of the lawsuit challenging the city's General Plan and which precludes
the city from challenging the Venture's entitlements before any public body (in
the absence of a significant requested change). The city is also precluded by
the settlement agreement from participating in the La Chusa Litigation.
During the nine months ended September 30, 1996, the Venture expended
approximately $608,000 on Rancho Malibu relating to entitlement activities,
holding costs and litigation. These costs, treated as capital contributions to
the Venture by the Fund, were included in total expenses from property operating
activities on the Fund's consolidated statements of income and expenses. As of
September 30, 1996 and December 31, 1995, the Fund's carrying value of the
property is $9,961,991.
LAKE ROGERS
On February 15, 1996, the Fund sold the remaining 11 single family home
lots in the Lake Rogers development to a unaffiliated third party for
approximately $165,400. After prorations for closing costs of approximately
$19,400, the Fund received net proceeds of approximately $146,000 and recognized
a loss of approximately $77,300 which was reflected in the consolidated
statements of income and expenses for the year ended December 31, 1995. The
Fund recognized no gain or loss on the sale of the Lake Rogers property for the
nine months ended September 30, 1996. The Fund had obtained ownership of the
Lake Rogers property pursuant to a deed in lieu of foreclosure settlement on its
Westholme loans.
HEMET PHASE III
Hemet Phase III is an approximately 19-acre land parcel zoned for the
development of 75 single family home lots located in Hemet, California. On
April 18, 1996, the Fund sold its interest in the Hemet Phase III property to an
unaffiliated third party (the "Purchaser") in exchange for cash of approximately
$125,000 and a $248,000 collateralized promissory note (the "Note"). After
prorations for closing costs of approximately $14,700, the Fund recognized a
gain on disposition of approximately $31,100. The Note bears interest at a
fixed rate of 10% per annum and requires monthly payments of interest. Upon the
sale of each lot by the Purchaser, the Purchaser is required to apply such
payments to the Purchaser's indebtedness to the Fund -first to any fees due,
second to accrued and unpaid interest and finally to the outstanding principal.
Final payment of any accrued and unpaid interest and the outstanding principal
balance of the Note is due and payable upon its maturity date of
April 18, 1997. The Fund obtained ownership of the Hemet Phase III
property pursuant to a deed in lieu of foreclosure settlement
on its Westholme loans. During the quarter ended
September 30, 1996, the Fund received principal and interest payments of
$88,000 and $9,173, respectively, on the Note.
3. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and administrative
expenses, are incurred on the Fund's behalf by Banyan Management Corp. ("BMC")
and are reimbursed at cost by the Fund. These costs are allocated to the Fund
and other entities to which BMC provides administrative services based upon the
actual number of hours spent by BMC personnel on matters related to that
particular entity in relation to total BMC personnel hours. The Fund's
allocable share of costs for the nine months ended September 30, 1996 and 1995
aggregated $246,546 and $467,909, respectively. As one of its administrative
services, BMC serves as the paying agent for general and administrative costs of
the Fund. As part of providing this payment service, BMC maintains a bank
account on behalf of the Fund. As of September 30, 1996, the Fund had a net
payable due to BMC of $800. The net payable is included in accounts payable and
accrued expenses in the Fund's Consolidated Balance Sheet.
4. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE
On July 5, 1996, the Fund received a cash distribution of $2,100 in
respect of its interest in a liquidating trust established for the benefit of
the unsecured creditors (including the Fund) of VMS Realty Partners and its
affiliates. The Fund has treated the $2,100 as a recovery of amounts previously
charged to losses on mortgage loans, notes and interest receivable on its
consolidated statement of income and expense for the nine months ended September
30, 1996. During 1995, the Fund received a cash distribution of $23,277 in
respect of its interest in the aforementioned liquidating trust and has treated
it as a recovery of losses on mortgage loans, notes and interest receivable on
its consolidated statement of income and expenses for the nine months ended
September 30, 1995.
5. SUBSEQUENT EVENT
On October 4, 1996, the H Street Venture and the United States General
Services Administration ("GSA") entered into an agreement whereby GSA agreed to
purchase approximately 3,500 square feet of the Venture's land for a purchase
price of $1,680,000. GSA has also agreed to pay the Venture $150,000 in
consideration of the Venture's expenses in connection with this transaction.
The agreement is subject to certain contingencies including the Venture
obtaining appropriate approvals from various government agencies for the
modifications necessary to the existing approved design for the proposed
building on the Venture's remaining property that will be required as a result
of this sale. In the event the aforesaid approvals are not obtained, the
Venture is not obligated to complete the sale to GSA. The closing is scheduled
to take place no later than March 15, 1997.
The Lindfield Tract A property is a land parcel which consists of 13
acres and is zoned tourist-commercial within a multi-use planned unit
development, located in Kissimmee (near Orlando), Florida. On October 15,
1996, the Fund sold its interest in the Lindfield Tract A property to an
unaffiliated third party for a sales price of $700,000. Pursuant to the sale,
the Fund received cash proceeds of $372,000, net of prorations and closing costs
of approximately $78,000, and a $250,000 secured purchase money mortgage note
(the "Note"). The Fund will recognize a book gain on disposition of
approximately $37,100. The Note bears interest at a fixed rate of 8% per annum,
and requires quarterly payments of interest. Final payment of accrued interest
and outstanding principal balance of the Note is due and payable upon its
maturity of October 15, 1997. The Fund's carrying value of this property as of
September 30, 1996 was $600,000. The Fund had obtained ownership of the
Lindfield Tract A property pursuant to a deed in lieu of foreclosure settlement
on its Westholme loans.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION
GENERAL
The Fund was originally established to invest primarily in short-term,
junior, predevelopment and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Fund. The Fund has ceased funding mortgage loans except where necessary to
protect the value of its assets acquired through foreclosure or otherwise. In
1990, the Fund implemented a plan designed to preserve its assets and manage its
properties acquired through foreclosure or otherwise until they would be
disposed of in an orderly manner. In addition, in 1990 the Fund suspended
distributions to stockholders due to its modest cash position and the
uncertainty regarding its remaining assets and future cash requirements. The
Fund continues to focus on preserving and maximizing the value of its assets,
including managing and/or improving development rights held on such properties.
The Fund currently holds an ownership interest in a 274 acre land parcel
located in Southern California known as the Rancho Malibu property as well as
other small parcels of land located in Florida and California. In addition, the
Fund acquired a 47% partnership interest in the H Street Venture which holds
title to an approximately 55,900 square foot office building and an adjacent
land parcel containing 17,000 square feet located in Washington D.C. The Fund's
current loan portfolio consists of the Northholme Partners and Hemet III and IV
loans.
Some of the statements contained in this quarterly report are forward
looking and actual results may differ materially from those stated. In addition
to the factors discussed, among the other factors that may affect liquidity and
capital resources as well as results of operations are: (i) the Fund's ability,
in respect of its interest in the H Street Venture, to sell the property to a
real estate developer or user that would develop the property for end use as an
office building; (ii) the Fund's ability to favorably resolve the La Chusa
Litigation which impacts the Rancho Malibu property; and (iii) the Fund's
ability to control its property level and Fund level operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at September 30, 1996 and December 31,
1995 was $72,150 and $549,309, respectively. In addition, at December 31, 1995
the Fund owned investment securities in the amount of $626,946. The decrease in
total cash, cash equivalents and investment securities of approximately
$1,104,000 is primarily due to the payment of approximately $608,000 related to
entitlement, litigation and holding costs associated with the Rancho Malibu
property and the payment of the Fund's property operating and other expenses of
approximately $853,000. Partially offsetting these decreases was the receipt of
interest income of approximately $54,000, net proceeds totalling approximately
$272,000 resulting from the sales of the Lake Rogers and Hemet III properties
during 1996, a principal payment of $88,000 relating to the Hemet Phase III
promissory note, and a $2,100 recovery of losses on loans, notes and interest
receivable relating to the VMS liquidating trust. See Results of Operations
below for further details.
The Fund's future liquidity needs are expected to be funded from cash
proceeds from the sale or any potential third party joint development of its
properties, collection of principal and interest on the Fund's loans receivable
and interest earned on the Fund's short-term investments.
On October 15, 1996, the Fund sold its interest in the
Lindfield Tract A property to an unaffiliated third party
in exchange for cash proceeds of approximately $372,000 and
a $250,000 secured purchase money mortgage note. The Fund's cash
resources, cash proceeds from the sale of the Lindfield Tract A property, as
well as cash anticipated to be generated from the sale of its various smaller
land parcels located in Florida and California which had collateralized the
Fund's loans, is anticipated to provide adequate liquidity to meet the Fund's
operating expenses plus the holding costs and operating expenses for the
upcoming year consistent with the Fund's business plan for the H Street
Assemblage, Rancho Malibu property and other various land parcels acquired
through foreclosure. In the event the Fund is unable to sell its various real
estate assets, the Fund will be required to seek additional sources of liquidity
to meet its operational needs.
On July 5, 1996, the Fund received a cash distribution of $2,100 in
respect of its interest in a liquidating trust established for the benefit of
the unsecured creditors (including the Fund) of VMS Realty Partners and its
affiliates. The Fund has treated the $2,100 as a recovery of amounts previously
charged to losses on mortgage loans, notes and interest receivable on its
consolidated statement of income and expenses for the nine months ended
September 30, 1996. During 1995, the Fund received a cash distribution of
$23,277 in respect of its interest in the aforementioned liquidating trust and
has treated it as a recovery of losses on mortgage loans, notes and interest
receivable on its consolidated statement of income and expenses for the nine
months ended September 30, 1995.
As of September 30, 1996 and December 31, 1995, the Fund's mortgage loan
portfolio consisted of three and two loans, respectively, with carrying values
totaling $945,000 and $785,000, respectively. During the quarter ended
September 30, 1996, the Fund received principal and interest payments on the
Hemet Phase III promissory note totalling $97,173. For the nine months ended
September 30, 1996 and 1995, the Fund accrued interest on these loans totalling
approximately $41,900 and $19,700, respectively.
RESULTS OF OPERATIONS
Total income for the nine months ended September 30, 1996 decreased to
$54,019 from $370,817 for the nine months ended September 30, 1995. This
decrease is due primarily to a decrease in income on investments. Income on
investments decreased due to a decrease in cash available for investment.
Total expenses for the nine months ended September 30, 1996 decreased to
$1,554,706 from $2,789,866 for the nine months ended September 30, 1995. This
decrease of approximately $1,235,000 for the nine months ended September 30,
1996 when compared to the prior year's period is due primarily to decreases of
approximately $399,000 in total expenses from property operating activities and
approximately $836,000 in total other expenses. The decrease in total property
operating expenses is primarily due to a decrease in net loss from operations of
foreclosed real estate held for sale. The decrease in the net loss from
operations of foreclosed real estate held for sale during the nine months ended
September 30, 1996 as compared to the same period in 1995 is due to a reduction
in legal and entitlement costs relating to the Rancho Malibu property subsequent
to the approval of the project by the Los Angeles County Board of Supervisors as
discussed below. Further contributing to the decrease in total expenses from
property operating expenses is a net gain from disposition of foreclosed real
estate held for sale of $31,091 for the nine months ended September 30, 1996 as
compared to a net loss from disposition of foreclosed real estate held for sale
of ($39,846) for the same period in 1995. See below for further details
regarding the disposition of the Fund's various property interests during 1996.
Partially offsetting these decreases in total property operating expenses is an
increase in net loss from operations of real estate venture relating to the
Fund's interest in the H Street property. See discussion below for further
details regarding the operating results of the H Street property. The decrease
in total other expenses is due primarily to decreases in stockholder expenses,
directors fees, expenses and insurance, other professional fees and general and
administration expenses. Stockholder expenses decreased for the nine months
ended September 30, 1996 as compared to the same period in 1995 due to the non-
recurring costs paid in 1995 associated with the Fund's tender offer.
Director's fees, expenses and insurance decreased due to a decrease in the
premium for insurance coverage of approximately $146,000 and a decrease in
director's fees and other compensation of approximately $21,000 as a result of a
decrease in the number of meetings held and the number of directors on the
Fund's Board. Other professional fees decreased because the legal costs
incurred in 1995 relating to the Key Biscayne litigation and the Fund's tender
offer were nonrecurring. The decrease in general and administrative expenses
was due primarily to a decrease in expenses of Banyan Management Corp. ("BMC")
which were allocated to the Fund based on the amount of hours spent by BMC
personnel on Fund related matters. The decrease in the hours required to be
spent by BMC personnel on Fund matters in 1996 is a result of the completion of
the Key Biscayne Settlement, the tender offer in 1995 and a reduction in hours
in 1996 associated with the Rancho Malibu litigation and entitlement
activities.
The above discussed changes resulted in a decrease in the net loss for the
nine months ended September 30, 1996 to $1,500,687 ($0.15 per share) from
$2,419,049 ($0.16 per share) for the nine months ended September 30, 1995. On
May 5, 1995, the Fund commenced a tender offer which resulted in the purchase by
the Fund of 9,309,747 shares of common stock. As a result, the net loss for the
nine months ended September 30, 1996 is based on the weighted average number of
shares of 9,936,421 as compared to 15,297,847 weighted average shares for the
same period in 1995.
Total income for the three months ended September 30, 1996 decreased to
$21,123 from $116,556 for the three months ended September 30, 1995. This
decrease is due primarily to a decrease in income on investments. Income on
investments decreased due to a decrease in cash available for investment.
Total expenses for the three months ended September 30, 1996 decreased to
$340,446 from $501,532 for the three months ended September 30, 1995. This
decrease of approximately $161,000 for the three months ended September 30, 1996
when compared to the prior year's period is due primarily to a decrease of
approximately $180,000 in total other expenses offset partially by an increase
of approximately $19,000 in total expenses from property operating activities.
The increase in total property operating expenses is due to a decrease in net
income from operations of real estate venture of approximately $218,000 offset
partially by a decrease in net loss from operations of foreclosed real estate
held for sale of approximately $199,000. See below for further details
regarding the decrease in net income from operations of real estate venture.
The decrease in net loss from operations of foreclosed real estate held for sale
during the three months ended September 30, 1996 as compared to the same period
in 1995 is due to a reduction in legal and entitlement costs relating to the
Rancho Malibu property subsequent to the approval of the project by the Los
Angeles County Board of Supervisors as discussed below. The decrease in total
other expenses is due primarily to decreases in stockholder expenses, directors
fees, expenses and insurance, other professional fees and general and
administration expenses. Stockholder expenses decreased for the three months
ended September 30, 1996 as compared to the same period in 1995 due to the
nonrecurring costs paid in 1995 associated with the Fund's tender offer.
Director's fees, expenses and insurance decreased due to a decrease in the
premium for insurance coverage of approximately $36,000. Other professional
fees decreased because the legal costs incurred in 1995 relating to the Key
Biscayne litigation and the Fund's tender offer were nonrecurring. The decrease
in general and administrative expenses was due primarily to a decrease in
expenses of BMC which were allocated to the Fund as described above.
During the nine months ended September 30, 1996 and 1995, the Fund
recorded a net loss of $68,607 and net income of $174,972, respectively, from
the operations of the H Street Venture. During the three months ended
September 30, 1996 and 1995, the Fund recorded net income of $17,424
and $234,905, respectively, from the operations of the H Street Venture.
Net loss from operations of real estate venture includes the Fund's
47% interest in the real estate venture known as the H Street Venture.
The H Street Venture owns an approximately 55,900 square foot
office building (the "Victor Building") and an
adjacent land parcel consisting of 17,000 square feet (the "H Street
Assemblage") located in Washington, D.C. During the nine months ended
September 30, 1996 and 1995, the Venture recorded a reduction in
real estate tax expense of approximately $200,000 and $459,000,
respectively, for real estate tax refunds, and interest
thereon, relating to 1992, 1993 and 1994 tax years. In
addition, real estate tax expense increased by approximately $159,000 for the
nine months ended September 30, 1996 as compared to the same period in 1995
resulting from a property reassessment during 1996 of the H Street Assemblage.
The Venture is currently appealing this reassessment. The H Street Venture is
currently marketing the H Street Assemblage for sale and will continue to try to
find ways to limit holding costs at the H Street Assemblage while attempting to
sell the property.
The above discussed changes resulted in a decrease in the net loss for
the three months ended September 30, 1996 to $319,323 ($0.03 per share) from
$384,976 ($0.04 per share) for the three months ended September 30, 1995.
On a quarterly basis, management reviews the mortgage loans in the Fund's
portfolio and records appropriate loss provisions. The provisions are based
upon a number of factors, including analysis of the value of the collateral and,
in certain cases, ongoing negotiations regarding disposition of this collateral,
as well as consideration of the general business conditions affecting the Fund's
portfolio. Management also reviews the investment properties held by the Fund
on a quarterly basis and, when it has been determined that a permanent
impairment in the value of a given property has occurred, the carrying value of
the property is then written down to its fair market value. Management has
determined that no reductions are necessary for the nine months ended September
30, 1996.
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Fund
and Banyan Mortgage Investment Fund ("BMIF") acquired title to the property
pursuant to a deed in lieu of foreclosure agreement. The Fund owns a 98.6%
general partner interest in the Venture while BMIF owns the remaining 1.4%
interest as a limited partner.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu and various
citizen groups. The city initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, the most recent of which
has been decided in favor of the Venture and as to which the
City of Malibu appealed. On December 5, 1995, the Court of Appeals of the State
of California decided this appeal in favor of the Venture and on January 4, 1996
a petition for rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
August 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, approved a revised plan to develop a fifty-one unit housing community on
the Rancho Malibu property. The Los Angeles County Regional Planning
Commission's approval was appealed to the Los Angeles County Board of
Supervisors. On May 7, 1996, the Los Angeles County Board of Supervisors
approved a compromise project to create forty-six single family lots. These
approvals are specified in Los Angeles County CUP No. 91-315(3), Oak Tree Permit
No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May 7, 1996.
On June 17, 1996, a neighboring homeowners association filed an action entitled
La Chusa Highlands Property Owners Association, Inc. v. Los Angeles County, et
al., Los Angeles County Superior Court Case No. BS039789 (the "La Chusa
Litigation"), challenging the aforesaid approvals. The Venture is named as a
real party in interest. If the plaintiff prevails in the La Chusa litigation,
the prior County approval of the tentative map and permits will be set aside and
the matter remanded back to the County Board of Supervisors for further action
consistent with the Court's decision.
The County and Venture filed answers denying the substance of the
allegations made by the plaintiffs. On September 30, 1996, the parties attended
a court-supervised settlement conference which did not result in a settlement.
On October 23, 1996, the parties, through their attorneys appeared before the
court for a status conference on the settlement meetings held in the case. The
court took no action in response to the plaintiff's request to file a motion for
sanctions against the real parties in interest predicated upon the plaintiff's
assertion that the real parties in interest were not attempting in good faith to
negotiate a settlement. The matter is currently set for trial on January 27,
1997.
In another action, the Venture challenged the General Plan and the
Environmental Impact Report associated with it adopted by the City of Malibu on
Nov. 20, 1995 in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited
Partnership v. City of Malibu, Los Angeles County Superior Court Case No.
SS006374. On July 31, 1996, the Venture and the City of Malibu executed and
delivered a settlement agreement which, among other things, resulted in a
dismissal of the lawsuit challenging the city's General Plan and which precludes
the city from challenging the Venture's entitlements before any public body (in
the absence of a significant requested change). The city is also precluded by
the settlement agreement from participating in the La Chusa Litigation.
During the nine months ended September 30, 1996, the Venture expended
approximately $608,000 on Rancho Malibu relating to entitlement activities,
holding costs and litigation. These costs, treated as capital contributions to
the Venture by the Fund, were included in total expenses from property operating
activities on the Fund's consolidated statements of income and expenses. As of
September 30, 1996 and December 31, 1995, the Fund's carrying value of the
property is $9,961,991.
On February 15, 1996, the Fund sold the remaining 11 single family home
lots in the Lake Rogers development to an unaffiliated third party for
approximately $165,400. After prorations for closing costs of approximately
$19,400, the Fund received net proceeds of approximately $146,000 and recognized
a loss of approximately $77,300 which was reflected in the
consolidated statements of income and expenses for the year ended December 31,
1995. The Fund recognized no gain or loss on the sale of the Lake Rogers
property for the nine months ended September 30, 1996. The Fund had obtained
ownership of the Lake Rogers property pursuant to a deed in lieu of foreclosure
settlement on its Westholme loans.
Hemet Phase III is an approximately 19-acre land parcel zoned for the
development of 75 single family home lots located in Hemet, California. On
April 18, 1996, the Fund sold its interest in the Hemet Phase III property to an
unaffiliated third party (the "Purchaser") in exchange for cash of approximately
$125,000 and a $248,000 collateralized promissory note (the "Note"). After
prorations for closing costs of approximately $14,700, the Fund recognized a
gain on disposition of approximately $31,100. The Note bears interest at a
fixed rate of 10% per annum and requires monthly payments of interest. Upon the
sale of each lot by the Purchaser, the Purchaser is required to apply such
payments to the Purchaser's indebtedness to the Fund -first to any fees due,
second to accrued and unpaid interest and finally to the outstanding principal.
Final payment of any accrued and unpaid interest and the outstanding principal
balance of the Note is due and payable upon its maturity date of
April 18, 1997. The Fund obtained ownership of the Hemet
Phase III property pursuant to a deed in lieu of foreclosure
settlement on its Westholme loans. During the quarter
ended September 30, 1996, the Fund received principal and interest payments of
$88,000 and $9,173, respectively, on the Note.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are incorporated by reference from the Fund's
Annual Report on Form 10-K for the year ended December 31, 1995:
Exhibit Number Description
(10) Material Contracts
(i) Second Amendment of Leonard G. Levine's
Employment Contract dated December 31, 1992
(ii) First Amendment to Second Amended and
Restated Employment Agreement for Leonard G.
Levine dated December 31, 1992
(iii) Directors Stock Option Agreement dated July
15, 1994
(iv) Executive Stock Option Agreements dated July
1, 1994 and July 11, 1995
(21) Subsidiaries of the Fund
The following exhibits are incorporated by reference from the Registrant's
Registration Statement on Form S-11 (file number 33-13585), referencing
the exhibit number used in such Registration Statement.
Exhibit Number Description
(3)(a) Certificate of Incorporation
(3)(b) By-Laws
(b) No Reports on Form 8-K were filed during the quarter ended September 30,
1996.
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANYAN STRATEGIC LAND FUND II
By: /s/ Leonard G. Levine Date: November 13, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: November 13, 1996
Joel L. Teglia, Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial
information extracted from Banyan Strategic
Land Fund II Form 10-QSB for the period ended
September 30, 1996 and is qualified in its
entirety by reference to such 10-QSB."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 72,150
<SECURITIES> 0
<RECEIVABLES> 1,046,347
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,067,283
<CURRENT-LIABILITIES> 528,250
<BONDS> 0
0
0
<COMMON> 19,539,033
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,067,283
<SALES> 0
<TOTAL-REVENUES> 54,019
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,554,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,500,687)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,500,687)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,500,687)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
